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Pro Analysis

Breakingviews: Paul Singer is giving Warren Buffet another reason to loathe hedge funds

Paul Singer speaking at Delivering Alpha 2015 in New York.
David A. Grogan | CNBC
Paul Singer speaking at Delivering Alpha 2015 in New York.

Paul Singer is testing Warren Buffett's adherence to his own investing wisdom. The hedge-fund chief's Elliott Management has cobbled a proposal to extract Texas electricity provider Energy Future Holdings from bankruptcy, challenging Berkshire Hathaway's $9 billion deal. Even if the rival plan is a stretch, the Oracle of Omaha famously eschews competitive processes.

Berkshire Hathaway Energy cleverly wooed regulators, who had been unhappy with two previous overtures from NextEra Energy and Hunt Consolidated. Buffett's enterprise intends to wind up with Energy Future's coveted 80 percent stake in transmission utility Oncor. The cash offer is less than what NextEra put forward. Even so, Buffett is providing a seamless exit path from bankruptcy into a fortified parent company that promises to reinvest all profit back into the business.